As the first-quarter earnings season kicks off, the usual retrospective analysis of banks’ performance is being overshadowed by a cascade of recent developments in Washington — none more impactful than President Donald Trump’s rapid policy shifts and his aggressive tariff strategy. With the president now back in the White House, markets and financial institutions alike are scrambling to adapt to what feels like a political and economic whirlwind.
In a normal quarter, investors might be focused on balance sheets, loan growth, and interest rate forecasts. But this time, the dominant question looming over earnings calls is much bigger: Could Trump’s tariffs drag the U.S. economy into a recession?
Banks Face a Shifting Political and Economic Terrain
JPMorgan Chase, Wells Fargo, Morgan Stanley, and Bank of New York Mellon are among the first major financial institutions to report earnings this quarter. They’ll be followed next week by the rest of the nation’s large banks and nearly 20 regional players. All will be reporting under the shadow of Trump’s early-term whirlwind — including sudden tariff announcements, regulatory rollbacks, and controversial policy pronouncements.
Trump’s April 2 declaration of broad-based 10% tariffs on imports stunned Wall Street, triggering a dramatic market selloff. The KBW Nasdaq Bank Index, a key measure of bank stock performance, plummeted 15% between the announcement and April 7. Then, just two days later, the president hit the brakes, pausing tariffs for 90 days on most countries. The markets responded with a 9% surge in the index — a clear reflection of just how sensitive investor sentiment is to White House maneuvering.
According to Barclays analyst Jason Goldberg, the sheer surprise of the announcement caught many off guard. Though the tariffs came after Q1’s books had closed, Goldberg predicts they will dominate the tone of management’s earnings discussions — particularly with regard to full-year forecasts issued just a few months ago.
Scott Siefers of Piper Sandler echoed the sentiment, saying, “We doubt we’ll get all the answers we want with earnings, but at least banks will have the chance to respond to the emerging backdrop and to shape expectations about how they will perform within it.”
A New Political Reality for Financial Institutions
Since Trump’s inauguration in January, his administration has wasted no time implementing sweeping changes — many of which have significant implications for the banking sector. From escalating trade tensions with Mexico and Canada to halting initiatives at the Consumer Financial Protection Bureau (CFPB), the federal government’s posture toward financial regulation has shifted dramatically.
One particularly contentious move has been the administration’s stance on diversity, equity, and inclusion (DEI) efforts. By labeling DEI initiatives “illegal,” the White House has effectively pressured banks to walk back or entirely remove DEI language from public disclosures and annual reports. For institutions that had invested heavily in these efforts — both as a moral stance and a strategy for talent development — this pivot has created considerable internal friction.
Rate Anxiety and a Fed in Limbo
Adding another layer of complexity is the Federal Reserve’s current stance on interest rates. In March, the Fed held the federal funds rate steady between 4.25% and 4.5% — its third straight pause in a “higher-for-longer” policy environment. While this might offer some short-term stability, banks are still hoping for eventual rate cuts to ease deposit costs and reignite commercial loan demand.
The new tariffs, however, have thrown another wrench into monetary policy planning. Fed Chair Jerome Powell recently said it’s too early to determine what the appropriate policy response might be. The uncertainty has left banks in a holding pattern, weighing the implications of elevated rates against the broader economic threat posed by a trade war.
What Investors Are Watching For
Against this turbulent backdrop, bank analysts and investors are bracing for earnings reports to reveal not just past performance, but signs of how management teams are preparing for an increasingly unpredictable future.
Key areas of focus include:
- Loan Growth: Analysts want to know whether lending activity picked up in Q1, and what executives expect for the rest of 2025, particularly in commercial lending and real estate.
- Credit Quality: With economic storm clouds gathering, any deterioration in asset quality will be closely scrutinized.
- Expense Management: Banks may begin cutting costs or delaying new initiatives in anticipation of slower growth.
- Revised Forecasts: Perhaps most critically, will banks revise their 2025 outlooks in response to recent policy changes and market turmoil?
The Road Ahead
For banks, this earnings season is not just a financial checkpoint — it’s a test of resilience in the face of rapid political and economic change. The combined impact of Trump’s tariffs, regulatory shifts, and the ambiguous Fed policy has created a volatile landscape, one where agility and clear-eyed strategy will be critical.
If there’s one takeaway from the past few weeks, it’s that policy risk is back in a big way. And for America’s banks, navigating that risk will be just as important as managing interest margins or loan books. As earnings roll in and executives take to the microphones, one thing is clear: the stakes have rarely been higher.
